Knowledge of the specific molecular consequences of biologic agents with therapeutic efficacy, such as rhu TNFR:Fc (etanercept), in he synovial compartment is important in understanding the basic pathophysiology of inflammatory synovitis in rheumatoid arthritis. Such information could be potentially used to provide a more precise diagnosis and to select subjects most likely to respond best to a biological agent. This trial is designed to define the mechanisms of action of etanercept, an inhibitor of tumor necrosis factor. Synovial tissue will be obtained from a knee joint using outpatient needle arthroscopy with direct visualization at baseline and at (2 month) anti-rheumatic medications. Patients will concurrently be randomized to receive etanercept (25 mg SW 2x/week) (n=15) or placebo (n=5) for the first 2 months of the study. All patients who complete the 2-month study will be eligible to enroll into a long-term open-label study.